08:07 – We got what looks like a couple inches (~ 5 cm) of wet snow through about midnight, followed by rain and freezing rain. The temperature is now hovering right around freezing, which is going to make Barbara’s morning commute a mess. Colin is enjoying the snow. He’s never seen much of it.
Even with everything else going on, we’re managing to keep up with the demand for science kits. All of the kits are in stock, and we’re building more as fast as we can. The problem is, this is supposed to be a slow time of year, and I’d planned to spend this slow period doing things like pre-labeling thousands of bottles and otherwise preparing for the rush. Our goal for this year is 500 kits, but at the current run rate we’re doing close to that now on an annualized basis, not taking seasonality into account. Factoring in seasonality, if our current run rate holds up, we’d easily do 1,000 kits this year–our goal for CY 2014–and we might do 2,000. That’s why I’m kind of hoping that this mini-rush is an anomaly. If it isn’t, we’re going to be covered up all year long.
11:28 – I certainly don’t always agree with Ambrose Evans-Pritchard–he’s much too Keynesian for my taste–but his articles and blog entries are usually worth reading. Here’s an interesting one: A new Gold Standard is being born
I agree with him that returning to the Gold Standard is a bad idea, but not for the reasons he thinks. He favors fiat currency because he wants governments and central banks to be able to fiddle with the money supply. I don’t. I’ve always been a hard-money guy. Giving any government the ability to create “money” out of nothing always, without exception, ends badly. And, as he points out, central banks and governments are fully aware that the value of the Big Four fiat currencies–the US dollar, the euro, the GB pound, and the Japanese yen–are going to have their value inflated away big-time. No one wants to hold any of them, given a choice. The dollar is still by far the best of the four, and it’s pathetic. Gold and other commodities can’t be inflated.
But gold is a very poor choice of a value store, for two reasons. First, there’s not enough of it. At $2,000 per troy ounce, a kilogram of gold is worth only about $64,000. A tonne (1,000 kilos) of gold is worth only $64 million, and a kilotonne (1,000,000 kilos) only $64 billion. The other, and more important, reason is that a value store should be valuable because of what you can do with it, not merely because it’s rare (in an economic sense). Gold does have many practical uses, but certainly none that require it by the multi-kilotonne.
I would like to see the US dollar become a hard currency again, as it hasn’t been since 1964 (or 1970, depending on how you look at it). But returning to the Gold Standard isn’t the way to do it. Instead, the federal government needs to remonetize our currency by holding a defined basket of commodities for each dollar issued. The value of a dollar might be defined as a combination of so many milligrams of gold, so many milligrams of copper, so many grams of wheat, so many grams of petroleum, and so on. The actual value of those commodities will fluctuate with market conditions, but having the basket contain 100 or 1,000 different commodities minimizes the effects of such fluctuations and would keep the value of the dollar stable. But the key issue is that the government must actually hold the required commodities in the required amounts for each dollar it issues, and must redeem those dollars on demand by accepting a dollar and handing the depositor that market-basket mix.
Of course, you wouldn’t be able to walk into a bank, hand them a dollar bill (or even a $1,000,000 bill) and expect them to cough up the appropriate amounts of 100 or 1,000 different commodities. But the market would take care of that. You would be able to hand over $1,000 or $1,000,000 and receive the appropriate commodity or mix of commodities in the amounts that reflected the current market prices of those commodities.